Tuesday, October 7, 2014

2014.10.06 VIX Cycle Model Chart

2014.10.06 VIX Cycle Model Chart


















The VIX cycle model continues to suggest higher index prices going forward, with a peak of about 35 at the end of 2014. The usual caveat with this model is that it does not capture very short time frame price swings, but it does seem to be a reliable longer term model, for now.  The previous iteration of the model is shown here and below.


2014.09.12 VIX Cycle Model Chart

5 comments:

rotrot said...

another forecast worthy of note...keep up the great work!

Anonymous said...

I think you've nailed it!

Mr. Anon

Paolo said...

Thank you both, rotrot and anon. There is probably some room in TA for this type of cyclical model analysis for certain time series. This one may be one of them.

Anonymous said...

Hello Paolo,

With the recent VIX spike, what is your DJIA model suggesting? I know that the large Z-score deviations are weakening its apparent applicability, but I'm wondering if the recent falls have provided additional data to bring the model "back to market" so to speak.

Recent discontinuous "gapping" action in VIX suggests all is certainty not well with the markets. Even if the markets rally from here towards ATHs, it may only delay an impending correction.

All of your models are a great help, I've recently started taking a "systems view" of markets - especially how crude and other commodities impact equities. The hardest issue is mainstream psychology, but perhaps it can be unknowingly modelled.

For example, EW attempts to capture the cycles of mood and sentiment, which are naturally bound within subjective limits (0.0 to 100 Fn[despair/euphoria]). Although not perfect by far, the market does seem to move in fractal-like patterns suggesting underlying repetitive drivers of some sort. Maybe your models unknowingly capture such features, either directly or through Z-score deviations.

Perhaps sentiment contributes to Z-score deviations by manifesting in "crowded trades" leading to discounts and premiums, whereby herding behaviour overshoots highs and lows in terms of "fair value" or some objective schema.

If you ever decide to model Forex or the S&P 500, you would find one eager user right here! EURUSD with its massive liquidity ($ billions per day) might be a good model, since it apparently charts well from a conventional TA perspective. At least compared to indices, which can be gamed and manipulated to some unknown extent. (Its hard to assert that it is a 100% perfectly efficient market)

It would be great to view the latest DJIA iteration,

WhiskeyAlpha (aka Mr. Anon)

AM said...

I have a feeling the models are about to fall apart. Just a gut feeling. Nothing else to back it up..